Atatürk Üniversitesi İktisadi ve İdari Bilimler Dergisi, cilt.33, sa.3, ss.755-772, 2019 (Hakemli Dergi)
This study investigates the market reaction to the increases and decreases in
corporate governance ratings of public firms quoted at the Borsa Istanbul (BIST), as well as the
market reaction to the increases and decreases in the scores for the subcomponents of the total
ratings. The findings suggest that investors react negatively to the announcements of decreases in
the overall corporate governance ratings and the scores for the four subcomponents. On the other
hand, the findings surprisingly suggest that investors also react negatively to the announcements of
increases in the overall corporate governance ratings and the scores for the subcomponents of these
ratings. These findings contradict the expectation that investors would value improvements in
governance ratings highly based on the assumption that increases in these ratings would imply
improved corporate governance that would lead to decreased agency costs and therefore, increased
firm value. The findings are robust to various econometric specifications and tests.